NEW YORK - The Scranton, Pa., Parking Authority went officially into default on Friday after the City Council Thursday turned down a request to pay $940,000 from a contingency account for a loan payment.
Because the city backstopped the loan, Mayor Peter Doherty fears the default could jeopardize $16 million of borrowing Scranton needs to plug a budget deficit, potentially pushing it into bankruptcy. The city recently enacted tax hikes of nearly 80% to secure the loan.
The council vote was 3 to 1 against, with Jack Loscombe, Pat Rogan and Frank Joyce in the majority. Robert McGoff voted for the expense, fearing the consequences of default.
“I believe that if it goes into default and we go into court that the unfunded debt that we’re looking to receive will not be available. And we’re looking at $16.5 million of unfunded debt that’s in the budget, and if we can’t get that, I don’t know how we make up $16 million,” McGoff said after the meeting.
But Loscombe said taking a firm stand against the authority would represent a show of strength to the capital markets.
“I look at it the other way,” he said. “I look at the people that are offering the loans saying, 'Boy, these guys are serious about getting the city straightened out. They’re looking the right way. They’re not bailing everybody out. They’re worried about the city itself.’ ”
Parking Authority executive director Robert Scopelliti, whose absence from previous meetings irritated some council members, appeared at a public caucus Thursday and requested the funds, but failed to sway enough council members. Scopelliti blamed the economic downturn for failing to make a payment on a $16.1 million bond it issued in 2004.
According to an official statement, Financial Guaranty Insurance Co. was the original bond insurer. That exposure is now with National Public Finance Guarantee Corp. Should a default continue, the insurer could sue the city or legally request a receiver dedicated to oversee the authority’s finances, akin to a move by incinerator bond creditors in Harrisburg.
Messages were left with Doherty, Scopelliti and FGIC seeking comment.
There are multiple Parking Authority issues listed on the Municipal Securities Rulemaking Board’s EMMA site. No continuing disclosures were posted for any of the issues as of mid-Friday, except for a notice about a 2004 advance refunding.